How Not to Punish Iran

March 16, 1995

Diplomatic history is littered with attempted economic boycotts and reprisals that have not worked. A prize example, we fear, is Washington's decision to bar Conoco Inc. from developing a $1 billion oil field project for Iran in the Persian Gulf.

Granted, the administration has good cause to display U.S. disapproval of Iran's attempts to obtain weapons of mass destruction, to derail the Middle East peace process and to promote international terrorism. Granted, too, there is a case for putting greater pressure on Russia to withdraw its plans to supply Iran with four nuclear power plants that would produce weapons-grade plutonium.

But of what use is the Conoco gesture if two French companies are waiting eagerly to gobble up business than would otherwise go to a U.S. corporation? In what way is U.S. policy clear and consistent when Washington permits foreign subsidiaries of U.S. companies to purchase one-quarter of Iran's petroleum output for sale elsewhere and it allows U.S. exporters to supply Iran with consumer goods totaling almost $300 million a year?

Senate Banking Committee chairman Alfonse D'Amato is to hold hearings today in a bid to close these loopholes and make the U.S. economic ostracism of Iran more complete. While this would infuse U.S. policy with greater consistency and damage Iran's floundering economy, there is no reason to think our European allies would cooperate. They see Iran as an important source of energy, a hegemonic power in the gulf and a nation too large and too well endowed with oil reserves to be contained.

The administration, with considerable Republican support, follows a principled policy of "dual containment" toward both Iraq and Iran. In the former case, mainly because of greater international solidarity, Iraq has been hemmed in. Not to any comparable degree has this been the case for Iran.

Tehran's surprising decision to seek an oil development contract with an American company is seen in some quarters as a conciliatory effort by business-minded countertypes to the Islamic fundamentalists that should have been welcomed.

In dealing with China, Vietnam and even North Korea, the administration has pursued "economic engagement," this on the theory that opening up closed regimes is in U.S. interests. There are domestic political reasons why this is not feasible for Iran, Iraq and Cuba, but that will not prevent the Conoco decision from being a loser.